Services Trade Talks Begin as WTO Seeks Way out of Stalemate

Countries representing 70 percent of the global economy are set to negotiate lower barriers to trade in services after agreeing the structure of a deal, Australian Trade Minister Craig Emerson said in an interview.

The push for a deal on trade in services is one of several attempts to steer the World Trade Organization (WTO) towards achievable goals for trade reform, a contrast with the ambitions of the Doha Round of talks that collapsed last year.

Australia, which rode out the economic crisis on the strength of its trade with China, is now at the forefront of efforts to kick start talks to reduce global barriers to trade, with the emphasis on picking winnable battles.

“I think that’s better than spending many years getting the perfect agreement with the perfect level of ambition and settling nothing until that happens,” Emerson said. “That’s been one of the defining features of the Doha Round, which has led us nowhere.”

The new pact involves 46 countries and could affect a wide range of sectors – from banking and insurance to air transport and healthcare – now regulated by rules that are not easily transferable across borders.

Until now, supporters of the move had been split on how to do it.

The United States was keen for a “high quality” deal covering everything not explicitly excluded. But the European Union urged a simpler design that could easily accommodate new joiners, with the ultimate goal of being “multilateral” – including every member of the 157-strong WTO.

“We still retain the strong ambition that it can be multi-lateralized and the design features will be sensitive to that but the most important thing is just to get on with it,” Emerson said after hosting talks on the plan in Geneva.

The final approach is a “hybrid”, he said; open to all but with benefits only accruing to signatories – who would open trade in services to each other but not to other WTO members.

“It already covers 70 percent of global GDP and 70 percent of services. That’s likely to be a club that people would want to join.”

BALANCING ACT
Informal negotiations under the agreement have already begun, Emerson said, although the formal launch is expected only at the start of 2013. Some participants have previously said they want a deal signed within a year.

However, many developing countries are aghast at the idea of a deal covering fewer than one in three WTO members. They regard the proposal as a betrayal of Doha Round promises that nothing would be agreed until everything was agreed.

The WTO is slowly emerging from the Doha stalemate and is now trying to find smaller chunks of reform that offer something for everybody.

The likely center piece of such a deal is “trade facilitation”, which means cutting red tape and standardizing customs procedures, and which Emerson said was estimated to account for 44 percent of the value of the Doha Round.

Many of the poorest countries have bristled, however, about the costs of complying with the standard.

Asked if it might make sense for a minority of WTO members to forge ahead with trade facilitation, as they have with services, Emerson said: “We’re more optimistic than that.”

But it was important that rich countries honored promises to tackle other areas too.

“There is an understandable anxiety that people don’t pack up their tents at the end of a successful negotiation and leave unattended all of the other issues that are of great interest to developing countries,” he said.

“That’s an assurance that we will give for Australia and I’m very happy to talk to other countries about giving.”

To balance out trade facilitation, many WTO members have welcomed a proposal on agriculture by 20 developing nations.

Emerson said the proposal was modest but designed to avoid any obvious “stop signs”, such as the need to change laws.

That means the deal would not make good on a long-standing pledge by all WTO members to ban export-distorting subsidies.

“It’s not off the table by any means but it does have the feature that it would require governments to go to their parliaments and the extreme likelihood of their parliaments then asking what that country gets in return for it,” said Emerson.